IN FOCUS: MUSCAT SLOWLY BUT SURELY · Budget balance (% of GDP) 0.80 7.40 16.70 10.70 (1.00) (1.30)...
Transcript of IN FOCUS: MUSCAT SLOWLY BUT SURELY · Budget balance (% of GDP) 0.80 7.40 16.70 10.70 (1.00) (1.30)...
IN FOCUS: MUSCAT
SLOWLY BUT SURELY
HVS | Liberty House Building, DIFC, 7th Floor, Office 715, Dubai, UAE www.hvs.com
OCTOBER 2014 І US$850
Cristina Zegrea Associate Hala Matar Choufany, MRICS Regional Managing Director
IN FOCUS - MUSCAT: SLOWLY BUT SURELY | PAGE 2
Introduction
Named by few as “the most spectacular destination on the Arabian Peninsula”, the Sultanate of Oman offers a rare combination of geographical variety including mountains and breathtaking coastal areas. Located on northeastern coast of Oman, in proximity to the strategic Strait of Hormuz, Muscat is the capital and largest city in Oman, with a population estimated at 1.2 million. The economy is dominated by trade, with Mina Sultan Qaboos Port being a large hub between the Persian Gulf, the Indian subcontinent and the Far East. The main pillar of the economy is the Petroleum Development Oman (PDO), the country’s second largest employer after the government. With the current strategy aiming to diversify the economy, the tourism sector is growing its importance to the national economy, which accounted for 6.4% of GDP in 2013. According to the World Travel and Tourism Council’s forecast, this is expected to increase by 9.4% in 2014 and is expected to reach a total contribution to GDP of 8.2% by 2024. Driven by the country’s 2020 Vision, considerable growth in arrivals is projected over the next years, leaving Oman in preparation to accommodate the increased demand by launching new hospitality developments.
Oman in Figures
309,500 square kilometers land area
3.83 million population, including 1.68 million expatriates
US$50 billion worth of development projects planned for the next few years.
US$15 billion estimated cost for the 2,250 km of railway network in Oman
945,000 barrels per day oil production in 2014
37.2 billion cubic meters gas production in 2013
US$41,853 GDP per capita in 2013
US$79,656 million Nominal GDP in 2013
US$1.5 billion foreign direct investments
A and A1 Oman credit rating by Standard&Poor and Moody’s, evidence of a stable economy
116 branded and unbranded hotels in Muscat, totaling 7,633 available rooms
7 five-star branded hotels in Muscat
5 four-star branded hotels in Muscat
8.3 million passenger movements at Muscat International Airport in 2013
12 million visitors targeted by 2020, up from 2.1 million visitors in 2013
45 destinations worldwide serviced by Oman Air
US$388 million hotel revenue generated during 2013, representing 11% year-on-year growth
US$662 million investment in tourism in 2013 with an 11.7% growth forecast for 2014
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Economic Overview
Oman’s economy shows steady GDP growth over the next four years, with average GDP growth forecast at 3.9% between 2014 and 2018. With the authorities actively pursuing a strategy aimed to diversify the economy, which is primarily dependent on oil and gas (accounting for 72% of GDP in 2013), the government policy is geared towards developing non-oil sectors, along with the country’s infrastructure such as railways and ports. Oman’s economic future is steadily leading to growth by the 2020 Vision and subsequent Five-Year Plans, of which the first was launched in 1976. The reform based on the aforementioned plans promotes a diversified economy through development and increased competitiveness, on the back of the authorities investing in key sectors, while attempting to attract private and foreign investments. Within this well-defined strategy, tourism constitutes a key component, with firm measures being taken in order to develop its importance to the national economy. According to the World Travel and Tourism Council’s forecast, this is expected to increase by 9.4% in 2014 and is expected to reach a total contribution to GDP of 8.2% by 2024.
Demographics
As a consequence of the development of the country, the ongoing mega-projects and Oman’s dependence on imported skills, the country is witnessing an influx of expatriates. The population is currently estimated at over 3.8 million as of February 2013, of which 1.7 million represent expatriates. This is expected to increase by 19%, reaching 4.3 million by 2016. The forecast growth will represent mainly additional expatriate arrivals in the country, on the back of ongoing mega-projects especially in the infrastructure and hospitality sector.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Real GDP growth (%) 3.30 5.60 0.30 8.30 4.20 4.20 3.90 3.80 3.80 4.00
Consumer price inflation (av %) 3.6 3.2 4.0 2.9 2.1 1.5 2.6 3.5 3.8 3.7
Budget balance (% of GDP) 0.80 7.40 16.70 10.70 (1.00) (1.30) (3.00) (3.80) (5.10) (6.50)
Current-account balance (% of GDP) (1.2) 10.0 14.7 11.8 6.4 6.9 5.2 5.2 3.0 2.4
Short-term interest rate (av %) 7.40 6.80 6.20 5.90 5.40 5.50 5.80 6.10 6.10 6.20
Exchange rate AED:US$ 0.385 0.385 0.385 0.385 0.385 0.385 0.385 0.385 0.385 0.385
Population 3.17 3.20 3.42 3.62 3.83 3.96 4.08 - - -
Source: Economist Intelligence Unit, September 2014
Actual Forecast
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
2010 2011 2012 2013e 2014f 2015f 2016f
Source: Business Monitor International
POPULATION
Economic Diversity and Stability
Develop Private Sector
Upgrade Omani Workforce
VISION 2020 MAIN GOALS
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Major Projects and Developments
Driven by the goals set in the 2020 Vision, the country is witnessing a transformation with major mixed-used
developments currently in planning or under construction. The real estate and infrastructure projects in in
Oman scheduled to be completed by 2022 are estimated to be worth in excess of US$112 billion.
Omagine
Following the development agreement signed on
October 2nd 2014 with thegovernment of the
Sultanate of Oman, Omagine LLC will design,
develop and operate the mixed-use Omagine
Project. The project is located approximately six
kilometers from Muscat International Airport
and spreads over one million square meters of
beachfront land including cultural,
entertainment, residential, retail, commercial
and hospitality components. The estimated cost
of the project is approximately USD$2.5 billion.
The construction schedule is yet to be released.
Al Nakheel City
The recently announced “Al Nakheel City” project is being developed by Alargan International Real Estate and is
estimated to cost approximately USD$500 million. The project is located in the Abu Al Nakheel Area, behind Al-
Naseem Park and will be developed as an Integrated Tourism Complex (ITC), featuring residential and
hospitality components, as well as a manmade lagoon.
Saraya Bandar Jissah
Spreading over 2.2 square kilometer, the USD$600 million project represents the first integrated tourism
complex launched in the sultanate after seven years. The unique mixed-use development is located in eastern
Muscat, nestled in a valley surrounded by the Al Hajar Mountains. Promoted as “Oman’s newest luxury address”,
the development will offer 398 residential units, two beachfront, five-star hotels and recreational facilities. We
note that construction is currently ongoing and the first phase is set for completion by 2017.
GCC Railway
The GCC Railway is an initiative of the all Gulf Cooperative
Council nations and is meant to link the six states together.
The railway will be 2,200 kilometers long and will span
from Oman to Kuwait, passing through the Kingdom of
Saudi Arabia, the UAE and Qatar. With each of the GCC
countries developing their own sections of the railway, the
project is expected to be completed by 2017.
Oman Railway
The Oman Railway company is currently developing a
local transport system spanning over 2,235 kilometers.
The Oman Railway project is part of the plan to connect
Oman to other GCC countries with the local project
consisting of three packages. Phase 1 comprises of the
Under execution Under bid
Under design Under study
Source: MEED, 2013
CONSTRUCTION PROJECT MARKET
0
5,000
10,000
15,000
20,000
25,000
30,000
Real Estate Transport Oil Gas Industry Power
Megaprojects (USD mn)
Source: MEED, 2013
MEGA PROJECTS BY SECTOR
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railway connecting Sohar Port to the UAE border, phase 2 will include a 139 km link between Sohar and Salalah,
while phase 3 includes the construction of a railway between Thumrait and the Yemeni border. The project is
expected to be completed by 2018.
Oman Convention and Exhibition Center
Announced in 2009, the project spreads over 2 million square meters and consists of four phases. Phase 1 is
further divided into five packages including the convention center, exhibition halls, two hotels and part 1 of the
Business District. Phase 2 includes part 2 of the Business District, a hotel and serviced apartments. Phase 3 will
include a hotel and serviced apartments and part 3 of the Business District, while phase 4 will include the
remaining portion of the Business District and a mosque. The project is expected to be completed by the end of
2016.
Sultan Qaboos Sports Academy
Located in Muscat and estimated to cost approximately USD$81 million, the Sports Academy is designed to house
a 60 m and 200 m indoor running track, an indoor aquatic training center with Olympic-size swimming and
diving pools, including spectator stands for 1,000 people, a 3,000-seat outdoor tennis stadium with a roof
structure, football fields, a 400 m athletics track, a tennis stadium, beach volleyball courts, a gymnasium, a
sports medicine center, a sports science facility and laboratories. The project is expected to be completed by the
end of 2017.
Muscat International Airport
Muscat International Airport is undergoing extensive renovations and expansion work, which are expected to be
completed by the end of 2014 and will increase the handling capacity to 12 million passengers annually. Further
expansions are planned in three subsequent phases that will ultimately boost the airport’s annual capacity to 24
million, 36 million and 48 million passengers, respectively.
The Wave
Spread along a stunning 6 km stretch of Muscat's coastline, this world-class Integrated Tourism Complex
comprises a group of luxury residential properties including villas, townhouses and apartments, commercial
units, retail and dining facilities and Oman's only signature designed PGA-standard 18-hole golf course, designed
by Greg Norman. The Wave, Muscat is also home to the 400 berth Almouj Marina, Oman's largest private
yachting hub. The next phase of development will see four luxury hotels and a 50-unit retail area at the marina
villagethat will form the commercial and leisure hub of the community. The completion date for the entire
development is expected by the end of 2015.
MAP OF MAJOR DEVELOPMENTS IN MUSCAT
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The Tourism Sector in Regional Context
Testament to the constantly increasing importance, according to the 2013-2014 World Economic Forum index on travel, Oman’s tourism competitiveness ranked 33 out of 148 participant countries. This positions the Sultanate’s tourism competitiveness fourth in the MENA region, after the UAE, Qatar and Saudi Arabiaand ahead of other well-established tourist destinations such as Turkey, Thailand or Italy. The growing tourism sector benefits from a sum of strengths including a safe and secure environment, good tourism infrastructure, unique geographical offerings and good transportation infrastructure. Capitalizing on its unique offerings, Muscat manages to successfully compete with well-established destinations within regions, achieving the highest regional RevPAR after Dubai, Jeddah and Riyadh.
The Tourism Sector in National Economy Context
With sustained growth reported over preceding years, according to the World Travel and Tourism Council (WTTC), the direct contribution of travel and tourism to the GDP in 2013 was roughly US$2,555 million, representing 3% of the total GDP. This achievement is expected to be outperformed in 2014, with forecast growth of 10.2%, equal to US$2,816 million. This will trend upwards on average by 5.4% per annum to
US$4,768 million by 2024 and will account for 3.9% of the total GDP. In terms of total contribution of travel and tourism, a growth of 9.4% is forecast in 2014 equal to US$5,651 million. Similar to the direct contribution, however more than double, the total tourism contribution to GDP is estimated to ramp up at a rate of 5.5% per annum, accounting for US$10,760 million by 2024, equaling 8.2% of GDP.
Foreign
Visitor Spending
46%
Domestic
Spending54%
Source: WTTC 2014
TRAVEL & TOURISM SPENDING
0
20
40
60
80
100
0
50
100
150
200
250
300
Occ ADR RevPARSource : HVS Research
US$ %MUSCAT MARKET PERFORMANCE (2013)
City 2012 2013 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013
Doha 70 % 58 % 66 % 59 % 63 % 64 % 304 261 230 231 232 197 213 151 151 136 146 126
Manama 75 68 66 34 64 49 262 205 209 204 197 222 197 135 138 69 126 109
Kuwait City 66 59 54 58 58 59 260 257 241 244 237 246 160 139 130 142 138 145
Makkah 60 55 54 55 67 63 182 228 202 238 235 208 109 125 109 131 157 131
Jeddah 77 73 72 72 73 78 208 205 181 176 223 249 161 148 130 127 163 194
Riyadh 74 67 63 63 65 55 236 297 261 264 257 277 174 187 164 166 167 152
Abu Dhabi 81 73 64 70 70 73 309 294 210 176 186 154 252 188 134 123 130 112
Dubai 81 69 72 72 82 81 261 184 167 191 211 236 210 132 120 138 173 191
Muscat 69 54 58 53 60 65 329 244 210 245 219 226 227 132 122 130 131 147
Source: HVS Research
MUSCAT HOTEL MARKET vs REGIONAL MARKETSOccupancy (%) Average Rate in US$ RevPAR in US$
2008 2009 2010 2011
Business
Spending35%
Leisure
Spending65%
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On the back of the economic development and the uniqueness of Oman’s landscape and culture, the country manages to attract both corporate and leisure visitation. In 2013, business spending accounted for 35% out of the travel and tourism contribution to GDP, while the remaining balance was attributed to leisure spending. What remains a particular characteristic of the country’s tourism sector is the relatively high domestic spending, which accounted for 54% of tourism spending in 2013.
Analytically, the sustained growth in GDP contribution is an indication of the continuous health of the overall economy in Oman. While the direct contribution reflects performance levels and revenues generated by the hospitality sector, the total contribution represents the auxiliary industries and sectors that benefit from the tourism sector. As demand increases, additional hotels will need to be designed, constructed, and operated, resulting in increased employment, a robust construction industry, and an increased need for residential communities to support the expatriate growth necessary to operate these hotels. Evidently, growth in one sector transcends into additional sectors.
Airport Statistics
As with the majority of international airports in the region, passenger movements declined in 2008 as a result of the global economic recession. Following the regional trend, Muscat rebounded rapidly, with passenger movements growing by 9.6% in 2013. Year-to-July 2014 data indicates that passenger traffic increased further by 7% in the first seven months when compared to the same period last year.
Muscat International Airport is undergoing extensive renovations and expansion work, which are expected to be completed by the end of 2014 and will increase the handling capacity to 12 million passengers annually. Further expansions are planned in three subsequent phases that will ultimately boost the airport’s annual capacity to 24 million, 36 million and 48 million passengers, respectively.
45 destinations
23 countries
Source: Oman Air, HVS Research
5 codeshare agreements
OMAN AIR NETWORK
0
2,000
4,000
6,000
8,000
10,000
12,000
2008 2009 2010 2011 2012 2013 2014 2024
GDP Direct Contribution (USD mn) GDP Total Contribution (USD mn)
Source: WTTC 2014
TRAVEL & TOURISM CONTRIBUTION TO GDP
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
2008 2009 2010 2011 2012 2013 2014 2024
Employment Direct Contribution Employment Total Contribution
Source: WTTC 2014
TRAVEL & TOURISM CONTRIBUTION TO EMPLOYMEENT
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
TOTAL PASSENGER MOVEMENTS
Source: Airport Council International, PACA
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Visitation by Source Country
The primary source of visitation to Muscat originates from Europe, followed by Oman and the GCC, which
together constitute roughly 44% of the total visitation. A significant portion of GCC demand originates from
the United Arab Emirates, with visitation facilitated by travel over land to Muscat, often perceived as a
weekend destination.
Among the European source markets, the United Kingdom continues to deliver the highest number of visitors to Muscat, reflecting an increased relevance of this market, especially to hospitality-related projects. In 2013, 133,529 visas were issued to British nationals, representing a 10% increase year-on-year. Following authorities’ efforts to promote the Sultanate as an Indian wedding destination, backed by the possibility for Indian nationals investing in ITC projects to obtain permanent residency in the country, India holds the highest number of visas issued in 2013, at almost double the UK visas. This represents a 10% year-on-year increase.
Total visitation to Oman increased at a 5.2% compound annual rate between 2010 and 2013, while similar growth is forecast for subsequent years. With Omani authorities focusing on developing further demand, efforts have been intensified and geared towards achieving the 12 million tourist goal set in the national 2020 Vision.
Seasonality
With the hotel market generally benefiting from stronger occupancy during the first, second and fourth quarter, Muscat exhibits a rather typical seasonality, following the structure pervasive throughout the Middle East and determined primarily by weather conditions. The highest level of occupancy is observed from November to March, with occupancy traditionally exhibiting a trough between July and September due to the extreme heat and weaker demand during the Holy Month of Ramadan. Nonetheless, the moving impact of Ramadan will gradually observe trough periods shift into previous peak periods, thereby impacting trough periods in the near- to mid-term.
0
50,000
100,000
150,000
200,000
250,000
Oman G.C.C. Other
Arab Countries
Africa Asia Europe South and
North America
Oceania Not Stated
2012 2013
Source:Ministry of Tourism
VISITATION BY SOURCE COUNTRIES (2012-2013)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
—
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Arrivals Occupancy
Source: Ministry of Tourism
Arrivals Occupancy
SEASONALITY
0
50,000
100,000
150,000
200,000
250,000
300,000
2011
2012
2013
VISITATION BY VISAS ISSUED (2011-2013)
Source: Ministry of Tourism
IN FOCUS - MUSCAT: SLOWLY BUT SURELY | PAGE 9
Key Performance Indicators
The hotel sector in Muscat has recorded positive performance over the last three years, with a visible impact on the economy. As a consequence, aside from travel & tourism accounting for 6.4% of GDP, it has also provided 72,000 jobs in 2013, with a growth forecast of up to 116,000 jobs by 2024. Year-to-date figures for September 2014 reveal a similar positive trend, with market wide branded hotels occupancy within the range of approximately 65%, two percentage points above same time last year performance. In terms of average rate, the branded hotel market is witnessing a 4% year-on-year growth, reaching US$223, evidence that demand growth in 2014 is not slowing down when compared to 2013. Given that four months of low season are included in this partial results, the performance indicators are not entirely indicative of the year-end performance, as occupancy and ADR are expected to trend upwards driven by the upcoming high season. Furthermore, the delay in opening hotels initially scheduled to open by the end of 2014 will serve to further improve market performance indicators.
With over 5,000 new branded rooms scheduled to enter the market in the next years, the operators prefer to act cautiously and closely monitor market dynamics. Enhanced government efforts to achieve the 2020 Vision goals, backed by the completion of major demand generators such as the Convention Centre, should relieve somewhat the pressure generated by supply growth overpowering the demand growth.
Year- to -September
2014
ADR
US$ 223
Occ
65%
RevPAR
US$ 144
0
10
20
30
40
50
60
70
80
90
100
0
50
100
150
200
250
300
350
Occupancy (%) Average Rate (USD) RevPAR (USD)
Source : HVS Research
USD %KEY PERFORMANCE INDICATORS (1994-2013)
Year- to -September
2013
ADR
US$ 213
Occ
63%
RevPAR
US$ 134
IN FOCUS - MUSCAT: SLOWLY BUT SURELY | PAGE 10
Hotel Market Demand
Currently perceived as an undersupplied market, especially considering limited international branded hotels, Muscat is underway to implement a strategy meant to ensure a sustainable hotel sector, addressing both the supply challenge, as well as creating the infrastructure and demand generators required by a healthy tourism industry. Intensified authority efforts to strengthen and diversify the demand generators are vital, especially when considering the approximately 5,000 branded hotel rooms scheduled to enter the market in the next four years.
Currently the hotel market demand emanates primarily from commercial and government segments, accounting for 42% of the overall demand. Extended-stay demand follows suit at 27%, on the back of a lack of high quality residential accommodation available in the market. This translates further into a particular characteristic of the Muscat hotel market, currently severely undersupplied with serviced apartments. As such, hotels tend to capture a considerable amount of extended-stay demand.
With Muscat International Airport continuing to undergo extensive renovations and expansion work. According to Oman Airport Management Company S.A.O.C. (OAMC), the new terminal at Muscat International Airport is scheduled to be completed by the end of 2014 (although our research indicates that as of October 2014 the work is 70% complete) and will have the capacity to handle 12 million passengers annually. Further expansions planned in three subsequent phases will ultimately boost the airport’s annual capacity to 24, 36 and 48 million passengers when the demand is required. Such initiatives, complemented by efforts from the Ministry of Tourism, are expected to boost corporate and leisure visitation to Muscat year-on-year.
Similarly, the much awaited completion of the Oman Convention and Exhibition Centre by the the end of 2016 is expected to boost MICE demand, currently accounting for a mere 8% of overall demand.
42%
8%3%
20%
27%
Commercial (incl. Gov.) MICE Airline Leisure Extended-stay
HOTEL MARKET SEGMENTATION
Source: HVS Research
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
UAE KSA Qatar Bahrain Oman Total
Luxury
Upper-Upscale
Upscale
Midscale
Budget
Serviced Apartments
% OF SUPPLY CLASIFICATION
Source: HVS Research
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Supply and Pipeline
As a result of the growing economy, paired with goals set in the 2020 Vision, the tourism sector is about to witness a major transformation. In order to become a key economic sector, the authorities are targeting major investments in hotel industry. The travel and tourism investment in 2013 alone was USD$662 million and is expected to rise by 6.7% per annum over the next ten years to USD$1,420 million by 2024. Much of this investment has been geared towards developing new hospitality projects.
Within this strategy, USD$14.7 million has been allocated to Omran for further tourism development. As previously mentioned, the Muscat hotel market is currently witnessing an undersupply in terms of internationally branded hotels, with only seven five-star and five four-star branded hotels available today in Muscat. A more stringent undersupply challenge is the lack of high quality serviced-apartments in the market capable of catering to the increasing demand.
Over the last two years minimal new supply has been introduced into the market. In 2013 alone, only the Holiday Inn Muscat brought 174 new rooms, increasing the branded supply from 2,994 rooms to 3,168. The overall supply available in Muscat counts approximately 7,600 rooms, which is expected to increase by 100% in the coming four-to-five years, provided that no further delays occur.
On the back of limited branded supply available, the international hotel operators in Muscat are scarce, with only seven players capitalizing on their presence. The highest number of rooms in the market is managed by Shangri-La, within the well-renowned Bar Al Jissah Complex. This is followedby InterContinental Hotel Group, currently being the only operator with three different brands available in the market: InterContinental, Crowne Plaza and Holiday Inn. With the upcoming supply scheduled to be introduced into the market, major international players will establish a presence including Starwood Hotels & Resorts, Millennium and Copthorne Hotels, Kempinski Hotels, Four Seasons Hotels & Resorts and Jumeirah Group, to name only a few.
1,350
1,400
1,450
1,500
1,550
1,600
Five-Star Four-Star Three-Star
EXISTING SUPPLY MUSCAT- NUMBER OF ROOMS
Source: Ministry of Tourism
0 200 400 600 800
Wyndham Hotels
Accor Group
Marriott International
Hyatt
Carlson Rezidor Group
IHG
Shangri-La
Source: HVS Research
OPERATOR PRESENCE IN MUSCAT BY NUMBER OF ROOMS
HotelNo of
RoomsOpening
Somerset Panorama Muscat 220 2015
Copthorne Hotel Muscat 164 2015Grand Millennium Hotel Muscat 328 2015Millenium Executive Apartments 105 2014
Jumeirah at Saraya Bandar Jissah 316 2015
Kempinski Hotel The Wave, Muscat, Oman 309 2015
Muscat Al Qurum Beach 155 2016
Sundus Rotana Muscat 4* 245 2016
Sundus Arjaan Muscat 4* 100 2016
W Muscat 250 2017
Element Muscat 360 2018
The Westin Muscat 350 2021
Crowne Plaza Muscat 300 2016
InterContinental Muscat 250 2016
Anantara Al Madina A’Zarqa Resort & Spa 122 2014
Village Plaza Hotel The Wave 190 2015
JW Marriott 305 2017
Ghubra Golden Tulip Muscat 180 2015
Coral Plaza Qurum 88 2014
Swiss-Belhotel Muscat 95 2015
Shaza Muscat 190 2016
Four Seasons Jebel Sifah 275 TBA
Banyan Tree Jebel Sifah 316 TBA
IN FOCUS - MUSCAT: SLOWLY BUT SURELY | PAGE 12
ASSET CLASS ASSUMPTIONS
Asset Class No. of Rooms
No. of
Restaurant
No. of
Lounge/Bar Spa
Meeting Facilities
(m2)
Three-Star 220 1 1 N Limited
Four-Star 280 2 1 N 1,200
Five-Star 250 3 2 Y 2,000
Maximum Supportable Investments
In order to provide the maximum supportable investment for various asset classes in Muscat, several assumptions were taken into consideration. In all scenarios, the assumed opening date of the asset(s) is January 2014. Inflationary rates utilized in the various scenarios pertain to the consumer price inflation recorded in Muscat, according to the Economist Intelligence Unit as at September 2014. Ultimately, the asset(s) assume a ‘wet’ operation in that service of alcoholic beverages is permitted. Additional assumptions are highlighted in the Asset Class Assumption Table.
In addition to the highlighted assumptions, capitalization rates utilized in order to calculate the supportable investment figures range between 9.0% and 11.0%, whilst equity yields factored into consideration vary between 16.0% and 17.0%. In all cases, the loan to value ratio is 60%, while the holding period and the amortization assumed were 10 years and 20 years, respectively. With this in mind, presented in the adjacent tables are the maximum supportable investments for the three-star, the four-star and the five-star categories as estimated in Muscat
HVS estimates of the maximum supportable investment include the cost of land in the overall development cost and the development cost per key. While it is possible that maximum supportable investments may reach these indicated levels, it is plausible that development costs may fall under these levels. With
that said, it is equally possible that development costs may exceed these estimates, and we emphasize that no investment decision ought to be made without first consulting industry specialists.
Outlook
After reaching the milestone of US$1 billion revenue generated in 2012, Oman’s tourism sector has much to look forward to in the upcoming years, particularly with the development of major projects such as the Omagine, The Wave, Jebel Sifah, Muscat Hills and Oman Convention and Exhibition Centre. Stable, long-term growth also looks particularly promising for Muscat International Airport, the regional hub for Oman Air, which is expected to expand its capacity to approximately 48 million passengers in the upcoming years.
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Five-Star Four-Star Three-Star
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
100,000,000
Maximum Supportable Investment Investment Per KeySource: HVS Research
Total Investment (US$) Investment per Key (US$)
MAXIMUM SUPPORTABLE INVESTMENT
About HVS
HVS is the world’s leading consulting and services organization focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries. Established in 1980, the company performs 4,500+ assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 30 offices and 450 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. www.hvs.com
Superior Results through Unrivalled Hospitality Intelligence. Everywhere.
HVS DUBAI has a team of Middle East experts that conducts its operations in the Middle East and North Africa. The team benefits from international and local cultural backgrounds, diverse academic and hotel-related experience, in-depth expertise in the hotel markets in the Middle East and a broad exposure to international hotel markets. Over the last six years, the team has advised on more than 400 hotels or projects in the region for hotel owners, lenders, investors and operators. HVS has advised on more than US$55 billion worth of hotel real estate in the region.
About the Authors Cristina Zegrea is an Associate
with the HVS Dubai Office. After
practicing law for two years,
she redirected her focus to
hospitality sales & marketing.
Performing in various
managerial roles for established
international hotel chains,
Cristina developed a solid foundation and in-depth
understanding of hotel demand, rate positioning
strategies and hotel operations. While at HVS,
Cristina has conducted multiple feasibility studies,
valuations and rate positioning exercises throughout
the Middle East. [email protected]
Hala Matar Choufany is the
Managing Director of HVS
Dubai and is responsible for
the firm's valuation and
consulting work in the Middle
East and North Africa. Since
joining HVS, she has worked on
several mid and large scale
mixed use developments and conducted numerous
valuations, feasibility studies, operator search,
strategy advice, return on investment and market
studies in Europe, MENA and Asia. Hala has in-depth
expertise in regional hotel markets and a broad
exposure to international markets and maintains
excellent contacts with developers, owners,
operators, investment institutions and government
entities. Hala holds an MPhil from Leeds University,
U.K., an MBA in Finance and Strategy from IMHI
(Essec- Cornell) University, Paris, France and a BA in
Hospitality Management from Notre Dame
University, Lebanon. Moreover, Hala is a member of
the Royal Institute for Chartered Surveyors. Hala is
fluent in English, French and Arabic.
HVS | Liberty House Building, DIFC, 7th Floor, Office 715, Dubai, UAE www.hvs.com